Bitcoin and other digital currencies are not backed by anything and the world’s largest cryptocurrency is more like a speculative asset, according to a statement made by the Chairman of the Federal Reserve Jerome Powell.
During a virtual event organized by the Bank of International Settlements, Powell said that cryptocurrencies are highly volatile and digital assets like Bitcoin are a substitute for gold rather than for the dollar.
“Bitcoin and other cryptocurrency assets are more of an asset for speculation, so they’re not particularly in use as a means of payment. It’s more a speculative asset. It’s essentially a substitute for gold rather than for the dollar. Crypto assets are highly volatile, see Bitcoin, and therefore not very useful as a store of value, and they’re not backed by anything,” Powell said.
The Chairman of the Federal Reserve also highlighted the energy issues related to the mining of Bitcoin and other digital currencies. “I think with cryptocurrency assets, the public needs to understand the risks. There’s the volatility, there’s also the energy requirements for mining and the fact that they’re not backed by anything,” he added.
Bitcoin and Cryptocurrency Regulations
Ripple CEO Brad Garlinghouse recently mentioned on Twitter that the US lacks regulatory clarity regarding the treatment of cryptocurrency assets. The US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple in December 2020. The US Treasury also proposed strict regulations regarding Bitcoin and other cryptocurrency transactions in the country but some US States are working on a clear regulatory framework for the treatment of Bitcoin and other digital currencies under their jurisdiction.
During his latest address, Powell said that it is not possible for Bitcoin to replace the US dollar as a currency.
The adoption of Bitcoin as a mode of payment has increased significantly during the last few months. Tesla announced in February that the company is planning to accept BTC as a payment method for its products.